A HISTORY OF POLARIS

On Jul 31, 2013

Share

Here’s the world’s financial report for the past three years: Doom, gloom, suffering, loss and ruin. You hear it every evening on the news. If you want to see something completely different, take a look at Polaris. While the rest of the powersports industry has been circling the drain, Polaris is on a rampage. Here are some numbers to digest: Last year Polaris’ gross sales was 3.2 billion. For the last three years, that number has increased between 21 and 33 percent a year, and now Polaris is the largest maker of motorsports products in North America. If you have Polaris stock, it’s worth four times what it was when George W. Bush was in office. What’s the secret? Why has this company been raging in a time when failure is the norm? It comes down to us—American dirt riders and enthusiasts. We are 70 percent of Polaris’ business, and we have shown that we really like the ATVs and side-by-side products that the company is making.SUCCESS AND FAILUREClearly Polaris hasn’t always had the Midas touch. There were times when the financial reports didn’t look so happy, the products weren’t so good, and the timing was downright bad. Case in point: back in the late ’50s, when Polaris made nothing but farm equipment and snowmobiles, founder Edgar Hetteen and engineer David Johnson believed in personally approving the products. They would embark on long, harrowing adventures across the snowy wilderness in an effort to bring attention to snowmobiles. Eventually, the board of directors had enough of Edgar’s theatrics and insisted that he change the way he operated. He promptly resigned and went off to start a competing company, which would eventually become Arctic Cat. In the meantime, his brother Alan Hetteen took control of Polaris, only to face some very tough times. The company had banked on the success of a new front-engine snowmobile called the Comet. Internally, this became known as the “Comet crisis.” Not only was the product such a failure that the young company was forced to buy back all the units that were sold, but an early test session almost cost Allan Hetteen and engineer David Pearson their lives. The story, which is recounted on Polaris’ website, is a true tale of survival against the odds, much like the story of Polaris itself. Prior to production, the two engineers were flown to Mount McKinley in Alaska for testing. They had supplies for two days, and then they were to be retrieved by air. However, a storm prevented the airplane from retrieving them, and the two Polaris employees struggled to survive for nine long, cold days. Luckily, the storm broke before the situation reached dire levels. The good news was that the Comet performed well throughout the ordeal, and that encouraged the company to proceed with production. Unfortunately, it didn’t perform as well in the less-icy conditions of the lower 49 states, and Polaris had its own survival crisis. Within the company, they joked that of the 300 Comets manufactured, 800 of them were returned. Polaris recovered, though, because of the patience, persistence and innovation of the people involved. They regrouped, redesigned the product and became the leader in the young snowmobile industry. The next Polaris snowmobile was the Maverick, and it was a great success.There were other times in the company’s history that looked bad too. From 1968 to 1980, Polaris was owned by Textron. That marriage had started out well, and it allowed Polaris to grow. But large conglomerates aren’t especially well-known for the patience and persistence that had served the company earlier—ask any motorsports historian about the times when Harley-Davison was owned by AMF. It was all about the bottom line. The snowmobile market shrunk dramatically in the late ‘70s. The total market went from 495,000 units a year in 1971 to 87,000 in 1983. Makers of snowmobiles, which once numbered over 100, dropped to only four, and Textron wanted out. Luckily, the man that Textron had placed in charge of the company was W. Hall Wendel Jr., and he believed in Polaris’ future. He found people to invest in the company and buy it from the parent company—and then resigned from Textron to lead a new, independent Polaris. Again, the story is very similar to that of Harley-Davidson.Things didn’t turn around immediately, though. The snowmobile market continued to decline, so Wendel looked to the booming ATV market as a way to diversify. The timing couldn’t have been worse. At first, things looked great. The ATV market was huge in 1985 when the first Polaris Trail Boss came out, numbering about 650,000 units a year. Then, it all came apart. The Consumer Product Safety Commission launched an investigation into the increasing number of ATV injuries that were suddenly being reported. That resulted in a lawsuit against the ATV industry. The primary focus of the lawsuit was the three-wheeler, a configuration that Polaris had barely produced with an obscure model called the Scrambler. But the company was included in the suit, nevertheless, and that resulted in the Consent Decree of 1988. This was a formal agreement between the ATV industry and federal government that restricted and regulated the business. By 1989, the once-lucrative ATV market had shrunk to 148,000 units a year.

TURNING IT AROUNDThrough all those ugly times, one thing always seemed to rescue Polaris: innovation. That was what saved the snowmobile division in the ‘80s, and that was what saved the ATV division in the ‘90s. The Trail Boss had a number of features that no one had seen on an ATV. At the time, four-wheel drive was brand new, with Honda and Yamaha coming out with their first 4x4s at the same time. The Trail Boss was nothing like its Japanese competitors. It had an on-demand four-wheel-drive system that made it an odd cross between a sport ATV and a utility quad. It had a two-stroke motor made by Fuji, which was a small-bore version of the motor in the 400cc snowmobile. Like its snow-going cousin, it had a belt and pulley and a continuously variable transmission that required no shifting. The 4WD products from Japan were four-strokes with manual shifting. The Polaris also had floorboards and unified brakes. It was clear that Polaris had borrowed from the snowmobile industry, while the Japanese had borrowed from motorcycles. In the end, the ATV world would arrive at a cross between the two visions.

In the depressed economy of the late ‘80s and early ‘90s, Polaris gained market share in a big way and emerged with 25 percent of all ATV sales. In that period, there were a number of new models that were unlike anything else on the market. That included the Big Boss 4×6, a two-stroke ATV with six wheels. In 1990, the Trail Boss 350 arrived, which was a liquid-cooled 4×4. The company also produced two-wheel-drive models, which were all powered by the Fuji motor. In 1995, the Polaris Magnum 425 was powered by a Liberty four-stroke motor, which was made in the U.S. The next year, the first Sportsman arrived. It was still powered by the two-stroke motor, but it was taking shape, with hints of the features we associate with the Sportsman line today.

SIDE-BY-SIDE BEGINNINGSPolaris’ first involvement with the Ranger side-by-side line was a little like Columbus discovering the New World. It was the start of a great new era, but the original vision was something quite different. Columbus was just looking for a shortcut; Polaris just wanted a utility vehicle. Both got way more than what they bargained for. The first Ranger was a 1996 six-wheeler, designed to compete with the Kawasaki Mule. It was a success, but it soon was apparent that the six-wheel concept wasn’t a key part of the formula. A four-wheel version of the Ranger followed in 2000. Within a few years, Polaris was able to gain the attention of the U.S. Department of Defense, and, in 1995, Polaris Military was founded. The Ranger was a perfect match for the U.S. Army, which needed easily placed, lightweight, off-road transportation for theaters all over the world. In the meantime, the Ranger’s performance advantage over competitors in the utility market made some people wonder if there might be demand for a sporty version of the Ranger.Yamaha’s introduction of the Rhino changed everything in 2004. It was immediately clear that there was a pent-up desire to have a sporty, miniature, Jeep-like vehicle. The first Rhino 660 sold like crazy. Unfortunately, an alarming increase in litigation followed. It was a repeat of the same scenario that hit the ATV industry in the ‘80s. It’s a tribute to the courage of Polaris’ management that they weren’t scared off by the proliferation of Yamaha lawsuits. Polaris took lessons from the Rhino situation and launched the Ranger RZR in 2007. The first RZR was powered by the parallel-twin, 800cc, four-stroke motor, similar to the one in the big Sportsman. It was a massive hit, and that led to a succession of RZR models, including the RZR S (a wide-stance version), the XP 900 (a racing version) and the RZR 570 (a lower-cost version).

TIMELINE1954 First Polaris snowmobile created in Roseau, Minnesota1961 President Edgar Hetteen resigns to found Arctic Cat. Brother Allan takes over at Polaris1968 Fuji agrees to make motors, Textron buys Polaris1980 W. Hall Wendel Jr. takes over, arranges an independent purchase from Textron1985 First Polaris ATVs: Trail Boss four-wheeler and Scrambler three-wheeler1988 Consent Decree regulates ATV business, David Johnson retires1991 New plant in Osceola, Wisconsin, opens. Polaris enters personal watercraft market1994 Spirit Lake, Iowa, plant opens1996 Sportsman introduced1997 First Victory motorcycle manufactured1998 Ranger six-wheeler introduced2000 Ranger four-wheeler introduced2003 First EFI Sportsman 7002004 Ranger models produced for military2005 Polaris Defense division created. Polaris purchases 25 percent of KTM (all KTM shares sold by 2010) 2007 Ranger RZR 800 introduced2008 RZR S. Millionth Sportsman manufactured. RZR 170 introduced. Scott Wine becomes CEO2011 New plant in Monterrey, Mexico, opened. 2012 Polaris becomes the biggest seller of ATVs in North AmericaWHAT’S NEXT?Now, Polaris sits on top of the motorsports world. Scott Wine, the current CEO, took the reins of the company in a declining market and made massive strides, gobbling up market share and making Polaris one of the hottest properties in the business world. That’s a reoccurring theme in the company’s history—pulling success out of darkness. How long will it continue? Frankly, the company’s success is no mystery to us. It’s all about enthusiasts making products for enthusiasts. As long as Polaris sticks to its identity as an innovator, and as long as the company—from the assembly-line workers to the management—still believes in its product enough to strand themselves on an ice floe to make a point, Polaris will continue to be successful.